Insurance 101

The Basics
As of July 1, 2008, Georgia Code Section 44-3-107 requires the Condominium Association to obtain property insurance as follows:

“The association shall obtain:

(1) A property insurance policy or policies affording fire and extended coverage insurance for an in an amount consonant with the full insurable replacement cost, less deductibles, of all buildings and structures within the condominium;….”

By law, the condominium master policy must insure the entire building structure and replace the structure to the way it was originally built. Any owner has the option to file a claim against the Association policy for interior unit damages. However, if an owner chooses to file a claim, the owner may be responsible for the policy’s deductible amount.

Your unit is covered based on original condominium plans. Example: fixtures, cabinets, flooring and appliances would be replaced with new items of like kind and quality to those originally installed. Any upgrades, betterments, and improvements are not covered by the association’s policy. This includes upgraded carpeting, wall and floor coverings, cabinets, and other permanently installed fixtures.

The property insurance policy is written under “special form” coverage. Perils insured include fire, lightning, windstorm, hail, explosion, riot, aircraft and vehicle damage, smoke, vandalism, falling objects, weight of ice, snow, or sleet, collapse, sudden water escape from plumbing and frozen pipes. No coverage is provided for wear and tear, deterioration, settling or cracking of foundation walls, basements or roofs as these are maintenance items. Flood and earthquake damage is also not covered.

Unit-Owners may be subject to assessment for insurance deductibles. The Association deductible for all covered perils is typically $2500 per occurrence. (Check your policy limits) Georgia Code Section 44-3-94 provides:

“To the extent provided for in the condominium instruments, the association may allocate equitably the payment of a reasonable insurance deductible between the association and the unit owners affected by the casualty against which the association is required to insure; provided however, that the amount of deductible which can be allocated to any one unit owner cannot exceed $5,000 per casualty loss covered under any insurance required by this Article.”

Since the Code only requires the Association to have Fire & Extended Coverage, deductibles for loss caused by perils not included in Fire & EC, such as water damage or flood and earthquake are not limited by the Code to $5,000.

Homeowner Coverage
Residential Unit Owners will need to purchase a condominium unit owner’s policy (HO-6) to insure your personal property, liability, additional living expenses, loss of rents, all dwelling upgrades and loss assessment. The Association’s policy carries a deductible per claim/occurrence. In the event of a claim the association may seek to recover the deductible amount from the unit owner(s) involved in the loss. Your obligation to pay the deductible can be covered by your HO-6 policy.

This information is provided to give you a general understanding of how condominium insurance works in the State of Georgia. Please check with your Association’s policy to determine the exact coverages in place. We are not experts in this field and are not giving you insurance advice. For your individual situation, please contact your insurance agent for advice and appropriate coverage to meet your needs.